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Online Share Trading

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Preference Shares

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Hey All, I would like to know is there anyone who can advise me withr egard to Pref shares. I have read loits about it, and would like to get it for its tax efficiency and dividend yields. What confuses me is I dont understand why most pref share are below R100 if R100 was their par value. eg Grindrod Pref shares..
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4 REPLIES 4
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Valued Contributor
because supply and demand drives prices .. so they trade above and below par value ..
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Occasional Contributor
Prefs work for me, specifically the more recent issues that are linked (refer back of FinWeek for list, together with up-to-date div yields etc) Distributions are based on nominal value (in your example, R100), but you can buy them on the platform for much less (say R86)so you returns will be above 10% - distributions (rate linked to prime) normally pay twice per annum, and this affects the market price before and after LDT. Divs are tax free in your hands. They are less volatile than equities. Risk is built into price, but hey, if you think Grindrod, Steinhoff and Netcare prefs are risky, then we are all in big trouble! Hope this helps ........?
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Hey, Thanks for all the help :) Definetly Helps :) I was actually looking at Grindrod and wanting to buy some in there. I have a sum of money that I would like to just invest to get some tax free income, and it seems like the route to go. Thanks for all the help.
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Occasional Contributor
Glad it helped - just a further suggestion - get hold of the list I mentioned, check out the respective % returns, and maybe opt for the Prefs that are "cumulative" this means that the Issuer can't declare Ordianry divs until any backlog of pref distribution has taken place - just a bit of extra comfort! Maybe look at NTCP, SBPP, SHFF, and ABLP as well as Grindrod. Most are in-between distribution dates, so tend to be cheaper at this point.
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